Typically, cars aren’t something I think about—but it’s hard not to notice them in California, where BMVs cut me off daily and people pump gas into Ferraris at the corner Chevron. The last time I considered cars, I wanted something unlike my first vehicle, a 1993 Chevy Lumina with 130,000 miles.

My mom—a single mother with two children—told me that if I wanted a driver’s license, I’d have to pay for the training and log all of the hours. While driving my permit-holding self to and from work, she clutched the grab handle in the passenger seat. Before turning eighteen, I emptied my savings account to buy a used car she insisted was a good deal. The asking price was $3,000, but her co-worker agreed to sell me the car for $1,500, which I had saved over a few years of bagging groceries and pushing carts.

Shortly after slipping on a glittery steering wheel cover and moving my cassettes—yes, cassettes—into Trooper, little things began to break, which was fine. He was old. Between cashiering, shopgirling, and taking four general education classes at the community college, I spent mornings, afternoons, and sometimes whole days in the auto shop, studying textbooks while mechanics fixed whatever was wrong.

When Trooper needed a new transmission, I refused to repair it despite my mother’s urging. She spoke from a place of ferocious survival, which I was too young to understand. I told her I wanted a new car; something dependable this time. So Mom got Trooper, replaced the transmission, and kept the car for my brother. I, at nineteen years old, paid zero down and took home a Honda Civic that saddled me with $293 in insurance and $330 in car payments monthly.

This was Rexy.

Rexy was more reliable than Trooper, but he was also more expensive. So, after spending a lifetime hearing how delicious waitressing money was, I applied at the new restaurant opening down the street. Because of my perfect score on the personality test, the server manager stored a lot of faith in me. The night of our soft opening, she made me shift lead: the person who works from beginning to end, cutting the floor as the rush ebbs, checking others out for their side and closing work, while their section continues being seated.

Despite growing up in a restaurant (my grandparents owned a mom-and-pop shop), I knew nothing about the difference between scotch and whiskey or vodka and gin. I didn’t know how to use floor plans and cleaning duty lists to piece together the building after it was destroyed by the lunch and dinner rushes. Scrawny, I couldn’t lift a tray of food over my head. Clumsy, I couldn’t balance drinks. They didn’t fire me, but they banished me to bad sections, which I deserved.

Because I had failed the serving-chops challenge and my bills were collecting, I needed flexibility to work as much as I could to afford both Rexy and college—then, when the bills got too high to afford both, just Rexy. Known as the girl who couldn’t be trusted with more than a three-table section, I could count on a hosting shift every Friday or Saturday, our busy nights. I learned from behind the podium, next to the phone. I even hustled a little. Experienced servers paid me to work their door shifts so they could pick up a serving shift; then I stayed for the closing hosts, who paid me so they could drink with friends, considering the night a wash anyway. I helped servers in the weeds come back to life, and sometimes they tipped me extra. Slowly, I proved my worth.

Months later, I finagled my way into a closing bar section, and tables filled. No one complained. No food was comped. I righted the detritus before it became an eyesore. My manager, happily shocked, nodded in approval. When she tacked the next schedule up, there I was: a closer. Needless to say, I could return to school because I, back in good sections, had a chance of paying my bills.

Dropping out of college to waitress full-time proved that I didn’t have the patience—or immune system—for a hospitality career. It made me want to go back to school as quickly as possible and get my degree. To ensure my success, I took out loans the next semester and every following semester, which—like the impulsive car—would punch-out my finances, choke-hold my freedom.

I’m in the group of people whose student loans are so high the number seems mythical. When certain people complain about their loans, they can still confess the sum to others: $12,000, $20,000, $35,000. When they do, I tell them that my debt ate their debt for lunch. What’s frustrating is that, other than the new car, I did everything “right.” I attended community college, transferred to a state university, lived at home. When I moved out, I found roommates. All while working full-time. After college, I worked two jobs while applying to graduate programs. I earned a teaching assistantship with a full tuition waiver for three years at a flagship university. I paid Rexy off months before driving him to Morgantown.

Even though I loved my new car, I kept hitting things with it (curbs, dumpsters, snow piles). No people, thank goodness, although sometimes people hit me. A woman teaching another woman to drive before explaining how to brake. A man who T-boned me, then gave me false insurance.

After a handful of account-draining deductibles and car insurance that finally decreased, parallel parking got the best of me. While trying to squeeze into a spot downtown, I scraped the right side of my car on a truck’s chrome bumper. Miraculously, the truck remained pristine. However, my car was anything but. At this point I was at the same place with Rexy that I had been with Trooper: I was not going to pay any more money to fix this car. I vowed to drive Rexy, as he was, until he disintegrated.

After graduating with my MFA, I got a job in Pittsburgh, a fifty-minute drive from my apartment. My then-boyfriend lived in the city. I mostly stayed with him. Twice a month I drove to fetch a new hamper of clothes in West Virginia, which isn’t equipped for winter driving. I’d take the winding cobblestone road leading to my apartment at five miles per hour. Without snow plows, I drove in the tire marks of others, the ice grating against Rexy’s underside. Eventually, the scraping knocked a bolt loose, making Rexy sound souped-up without the performance exhaust.

One night, a neighbor approached me when I arrived home late. “Are you ever going to fix your car?” she asked. Her breath sent up clouds in the freezing night. Humiliated, I nodded. “When I get my tax refund,” I said. She, the lady who hacked in her driveway all day, stared at me. Luckily, a family of deer appeared in the lawn across the street. “Look,” I pointed, and ran inside.

Owning a shitty car includes some perks. Other drivers give you space in parking lots and on the road. If your car is cheap enough to be fully paid off, you have no car payments and low insurance (assuming you’ve outgrown hitting inanimate objects).

My first humid Pittsburgh summer, the air conditioning blew hot gusts at me, so I had the coolant changed. The air was tepid at best—probably a hole in the coolant tank, the mechanic explained. I declined to fix it and put a folding fan in my glove compartment.

Fourteen years later in the Californian valley, where summer temperatures surpass three digits, it’s me, Rexy, and my fan. People at intersections laugh and smile at me, and laughing and smiling is—you know—infectious.

Recently, a piece of plastic in Rexy’s front wheel well fell down, hanging between tire and metal. With the windows down, I hear it. At 55 miles per hour, it sounds like the wind whipping through a pinwheel. It brings me incredible joy.

These days, I avoid highways. Interstate or not, I hoard the slow lane whenever possible. There is usually ample curb and ditch to drive into should Rexy croak. Other things I do in case he dies: use the bathroom before I leave, keep water in the car, and never fill my gas tank. It feels presumptuous, jinxy.

Owning the same car you drove as a teenager means occasionally engaging in an adolescent-level ugly cry. A recent job layoff coincided with a safety inspection renewal, which I failed in four ways. With a week to remedy a broken tail light, turn signal bulb, automatic window, and windshield wipers, I called my fiancé, sobbing in the parking lot. Luckily, I had the money (about $500 in savings) to make Rexy legal, but I was furious that I needed to invest more money in my shitty car, that I would soon be jobless, that my window didn’t roll up to conceal my flushed face, that the AC was broken so I was tears on top of sweat. But I had that $500 in my savings account because I hadn’t had to spend it on a car payment.

Since Rexy’s future is iffy, it makes servicing him problematic. Due for an oil change, I asked the service advisor for an inspection because I heard squeaking under my car. He returned with a stapled estimate. Staring at four figures, I asked him for time. I talked to my partner. He picked me up on his way home while Rexy slept, opened up at the shop, awaiting care.

Accepting my car’s mortality, I decided on no regrets. I’ll save for a down payment on a new car, fix only what is necessary, and hope for the best. Because my brake pads were as “thin as fingernails”—just 1 millimeter, the mechanic told me—I replaced the front ones because they do most of the stopping. I serviced my battery because sometimes it takes a few turns of the key to start Rexy in cold weather.

At my insurance agent’s office, I pussyfooted between full coverage and PLPD. We Kelley Blue Booked my car’s cash value—$3,394—but downgrading insurance felt like another jinx. Until I can’t receive a return on my deductible, I’ll keep Rexy fully insured. After all, he is my baby until he’s dust and scraps.

By day, Connie Pan works an 8 to 5 for money. By night, she contributes to Book Riot, serves as the senior editor of Ms. Aligned 2, teaches children poetry, and revises her novel manuscript. Her writing has appeared or is forthcoming in Carve, PRISM international, The Fiddlehead, Rosebud Magazine, and Bamboo Ridge. Follow her on Twitter @panlikepeter.

]]>https://www.thebillfold.com/2017/08/the-cost-of-a-shitty-car/feed/0Courts Are Forgiving Student Loans if Lenders Can’t Come Up With the Paperworkhttps://www.thebillfold.com/2017/07/courts-are-forgiving-student-loans-if-lenders-cant-come-up-with-the-paperwork/
https://www.thebillfold.com/2017/07/courts-are-forgiving-student-loans-if-lenders-cant-come-up-with-the-paperwork/#respondTue, 18 Jul 2017 19:51:01 +0000https://www.thebillfold.com/?p=32064Which, in this era of bundling and reselling debts, is happening more and more often.
Photo credit: Snufkin, CC0 Public Domain.

Today’s must-read longread is from the NYT, and it’s about student loans:

Judges have already dismissed dozens of lawsuits against former students, essentially wiping out their debt, because documents proving who owns the loans are missing. A review of court records by The New York Times shows that many other collection cases are deeply flawed, with incomplete ownership records and mass-produced documentation.

Some of the problems playing out now in the $108 billion private student loan market are reminiscent of those that arose from the subprime mortgage crisis a decade ago, when billions of dollars in subprime mortgage loans were ruled uncollectible by courts because of missing or fake documentation. And like those troubled mortgages, private student loans — which come with higher interest rates and fewer consumer protections than federal loans — are often targeted at the most vulnerable borrowers, like those attending for-profit schools.

Student loans, like subprime mortgages, get bundled, sold, and resold. And, as these loans continue to pass through various firms and debt collection services, individual details get lost or corrupted. Luckily—if you can call it that—when these companies sue people for falling behind on their loans, courts can dismiss both the suits and the loans due to poor recordkeeping:

When National Collegiate sued [Samantha Watson], the paperwork it submitted was a mess, according to her lawyer, Kevin Thomas of the New York Legal Assistance Group. At one point, National Collegiate presented documents saying that Ms. Watson had enrolled at a school she never attended, Mr. Thomas said.

[…]

When the judge’s rulings wiped out $31,000 in debt, “it was such a relief,” Ms. Watson said. “You just feel this whole weight lifted. My mom started to cry.”

I wonder if it’s time for The Big Short 2: The College Years. I’d watch it.

You may not agree with his approach or his conclusions but he’s making interesting, provocative points about the kind of life-altering decisions we let people make — specifically the kind of excessive financial burdens we let them take on — at a time when we, as a society, consider them to be still too immature to drink, get tattoos, join the army, or vote. And “let them” is, frankly, understating it, since college educations are more or less mandatory these days if you want to get a job.

The worst part is that we, as a society, allow corporations to profit off of those hard but necessary decisions. Consider this first-person essay by Nikko Mitrano Schaff in the Guardian’s “Life in the Red” series.

Schaff is almost as different from Saul as it’s possible to be. She was hyper practical about higher education from the start, and she’s done everything “right” since in terms of paying back her loans. But she’s still frustrated.

I enrolled at the Rochester Institute of Technology with a major in computer science and a double minor in entrepreneurship and Mandarin Chinese. I figured that whether software or China takes over the world, I’d find a way to make money. In my sophomore year I started a business with my buddies and we even got seed funding from the college to develop it over the summer. It didn’t work out, but the experience landed me an amazing internship with Apple. …

This is not a “woe is me” story. Instead, it is quite the opposite: this is a testament to how people in my generation can make the right decisions with their education, employment, and finances and still be taken advantage of in ways which will have ripple effects throughout their entire lives.

Her target in this piece is the entities allowed to profit off of her need to get an education to the tune of 6.55%.

The US Department of Education — which has financed 100% of my student debt — does not need to make a profit on my degree. In many ways, the profit to society has been made many times over: I have a stable job, I do not require government assistance to make ends meet, I have a retirement plan which lessens the future burden on social security and I pay plenty in taxes.

But my student loan provider — even as a non-profit corporation — does need to make money on my student loans to exist. …

I am a web developer. In less than a day I could create a website that lets you sign up for automatic, recurring bank withdrawals. Hook it up with the Stafford loan database and the government will have everything it needs to get its money back from me. If anyone at the Department of Education is reading this, contact me! I’ll make this site for you — I’ll even do it for free — just promise you can give me a more reasonable interest rate than 6.55%.

6.55% really is crazy, and yet that was the going rate only a few years ago. The average right now is lower than that, at about 4.29%, according to Credible.com.

But still: my mortgage charges around 3% and those fine folks at the bank are making plenty.

Bernie Sanders was tooting this very horn throughout his campaign. The Federalist would like to explain to those of us who agree with him, as though we’re a room full of golden retrievers, why I can get an interest rate for my mortgage that’s so much less than the one Schaff could get for a student loan, so if you’re interested in the patronizing, lecture version of the answer, here it is. Indeed, the author argues, student loan rates should be even higher than they are.

So higher risk means higher interest rates. Voila. Economics 101. I don’t pretend that interest rates in this area entirely reflect a free market and the laws of economics. They’re also heavily manipulated by government. But the effect of government interference has been to keep student loan interest rates too low and to make those loans too easy to get.

The article goes on to suggest that the student loan business should be run by the market, not the government, even if that means many fewer people will be able to attend college.

What if you want to take out loans to finance a degree in sociology or women’s studies or some other field that utterly fails to qualify you for productive work? Try running that up on your credit cards at 24.5 percent because no one else is going to touch it. Nor should they.

Charming.

Anyway, if you’d like the less condescending version of the economic thinking behind the disparity, the Washington Post has you covered. Their explainer points out that the chasm between my interest rate and Schaff’s isn’t as deep as it seems.

Interest rates for student loans are calculated in ways that are not comparable to mortgages. The student loan interest rate varies on the type of loan (undergraduate, graduate/professional, parent), additional fees, the year the loan was disbursed, and whether the loan was consolidated (and at what interest rate). Student loans disbursed between 2006 and 2015 had interest rates from 3.4 percent to 8.5 percent. …

Depending on the type of loans and years you choose, the comparison between mortgage and student loan interest rates is not as dramatic as Sanders portrays it.

Another very real difference, of course, is the presence of collateral.

these two loans are apples-to-oranges comparisons. Here’s one major difference: Your home is collateralized and student loan debt is not. This lack of collateral makes the student loan more risky than a loan for a home.

I get it. The absence of collateral makes student loans “risky.” Yet that risk doesn’t seem to be scaring anyone away: student loans have become an “enormous business opportunity,” as reported in Bloomberg.

Companies that have benefited from the loan program range from debt servicer Affiliated Computer Services Inc., now part of Xerox Corp., to Education Management Corp., which operates for-profit colleges and whose largest shareholder is Goldman Sachs Group Inc. Education Management settled with the government in November for almost $100 million over alleged illegal student-recruitment practices without admitting wrongdoing.

FMS Investment Corp., a unit of Ceannate Corp. that tried to collect from Sofia, was paid $227 million by the Education Department from October 2011 through September of this year, the most of any debt-collection company under contract in that period, according to the agency. Florida Coastal is part of the InfiLaw System, a consortium of three schools. A principal investor in InfiLaw is Sterling Partners, a private-equity firm that also owns a stake in Laureate Education Inc., which is planning an initial public offering next year.

Congress created the loan program 50 years ago with the goal of encouraging students to attend college. Today, the Education Department is one of the largest financial institutions in the country. If it were a bank, it would rank fifth in the U.S. in assets.

When I was interviewed for The Billfold’s “Doing Money” series, I included a few off-hand comments about debt, basic income, student loans. Maybe the short-form answers came across as more flippant than I intended, but I was surprised to see so many critical responses from Billfold readers.

I mentioned that I intended never to pay off my student loans because I’m on an Income-Based Repayment Plan that will forgive them after 25 years of making payments — even if those payments are zero. It may be the case that my income increases over the next few decades, and that I will pay something each month, but it seems unlikely that I’ll earn enough to ever pay off the remaining balance in full.

In fact, it makes more sense for me to earn under a certain level of income each year so that I can put my money toward future expenses (like securing my place in a housing co-op) rather than past expenses. That’s the calculus that I — and many other students who graduated into the recession — are working with.

And because my college degree turned out to be pretty useless overall (we’ll get to that in a bit), I feel morally justified in withholding my payment.

“In what world does this make sense? If I buy a sweater I never wear I still have to pay for it.”

Let’s put aside the vast difference in price tag for a minute. If your sweater had a label that read “Made in America. 100% cotton. Lifetime guarantee,” and then you found out it was made in an overseas sweatshop with toxic synthetics and needed patches after six months, you’d be pissed too.

That’s how a lot of my peers feel about college: we were given glossy brochures that outlined overly-optimistic career paths; taught technologically outdated skills; and offered very little support in adapting to the post-recession economy.

When I applied for my student loans, I was 17 years old. I’d lived in the same town my whole life, and had barely traveled outside of New England; my high school job was working for the small family business that my dad owned and operated.

Could I have made better choices if I’d had more real-world experience? Maybe — but I did the best I could with the information I had.

I turned down a mediocre financial aid package from an expensive Ivy League school to accept a moderately better one from a less prestigious liberal arts college. I chose the career path (writing and media arts) that my teachers — from grade school all through high school — had told me I excelled at.

If I had told anyone that I planned to get married, have a kid, or buy a home at that age, no doubt my parents and guidance counselors would have done all they could to talk me out of it. But signing a student loan package — an equally life-long commitment — was just par for the course.

Since I don’t believe that I was able to give informed consent in signing for those loans, I don’t consider it a valid agreement worth honoring.

“If you truly believe you learned nothing from your degree, that’s on you.”

While I said in my interview that my college degree didn’t help me with my career path, I didn’t say I learned nothing from it. And I didn’t pay nothing for it, either. My student loans were just a portion of my tuition, fees, and other expenses.

The amount of money I’ve paid already, including some initial loan payments, is, in my view, a fair amount for the education I received there.

But let’s be clear: the metric by which we judge the value of an education shouldn’t be whether or not we “learned something”. If I pay thousands of dollars for a car and it breaks down the next day, I wouldn’t expect someone to say, “Well, at least it got you somewhere. If it stops working now, it’s on you.”

I’d look up the local lemon laws.

In my case, it was pretty obvious within months of graduation that I hadn’t received the education I had been promised. My professors weren’t up-to-date on the latest technologies — many of the tools we’d used were becoming obsolete. Our Career Services department was as helpful as the DMV.

Maybe I should have recognized this earlier and dropped out after my freshman or sophomore year. But can you imagine how my parents would have responded to that? By this point, I was all in, and the rest of my savings went toward senior projects and a semester of unpaid internships.

My college education was a lemon. And the Income-Based Repayment Plan is the closest thing we have to lemon laws for junk college degrees.

Now, if you’ve been paying your student loans for years, I can understand why you might look at debt resisters like me and think we’re freeloaders. But to me, the real freeloaders are the financial institutions earning interest off of our bad fortune.

I see college grads like me as canaries in the coal mine.

We’re a symptom of what happens when a wealthy country doesn’t provide the option of a free college education to its citizens, or to offer graduates the safety net they need in a precarious job market.

I don’t think this situation is going to get any better for future generations, and we’re likely to see even more defaults and deferrals in the coming decades.

Even if you’re able to make your monthly loan payments now, it may still make sense to apply for the IBRP. You never know when circumstances will change — and if they do, you’ll be glad you got that 25-year countdown started.

And if you have kids of your own? Go ahead and send them to college in Slovenia.

Saul is a freelance writer living in an urban eco-village in Portland, OR. He blogs about intentional communities at www.ic.org, and about debt, freelancing, basic income, and other topics at Medium and on Twitter.

]]>https://www.thebillfold.com/2016/07/how-not-to-pay-your-student-loans/feed/0College Students Shouldn’t Work Exclusively to Graduatehttps://www.thebillfold.com/2016/06/college-students-shouldnt-work-exclusively-to-graduate/
https://www.thebillfold.com/2016/06/college-students-shouldnt-work-exclusively-to-graduate/#respondThu, 30 Jun 2016 17:29:39 +0000https://www.thebillfold.com/?p=7850A college degree should be accessible, affordable, and free to those in need.
Photo credit: Will Folsom, CC BY 2.0.

Last week, I wrote about overworking myself in college to dodge student debt. During my undergraduate career, I constantly told myself I was different, that I’d rise above the socioeconomic class I was born into with a college degree. I concluded that my story isn’t that different after all. Despite the unemployed recent college graduate narrative commonly seen in media, there are plenty of other overworked students — even ones working more hours than I did.

The essay was well-received by The Billfold’s community and among my own personal platform. A friend, Alaina Leary, approached me about how much she related to the piece. She came from a similar financial background and worked to pay for her program. Additionally, she mentioned her mother was disabled and her family’s EFC (Expected Family Contribution) was $0. I didn’t mention it in the original piece, but my mother was also unable to work because of her disability.

Another friend, Dylan Sprayberry, worked a weekly average of 48 hours in college — about 18 hours more than me. He also commuted an hour away from campus and rarely had a day off from both work and school. Unfortunately, he graduated with approximately $62,000 worth of loan debt, which covered two years of state college and three years of county college.

Conversely, once I sent my essay to another friend, Jersey Lovera, he quickly replied, “only 8k?!” Although we participated in the same scholarship program, he walked away with over $35,000 in student debt, including his Master’s program at NYU. While he worked only one job on campus, he wishes he would’ve worked harder in college. After I told him I’d sacrificed my social life to work, he reassured me that he didn’t stay connected with some of his close college friends.

In a comment, Hildegerd Haugen brought up an important point: “not everybody can take on this.” I will never truly understand the privilege of overcoming a stressful, demanding workload. I know the strategies I took to minimize debt aren’t available or accessible to everyone. I want college to be accessible, supportive and affordable (preferably free) for those in need.

Students shouldn’t feel obligated to take on multiple jobs exclusively to graduate. If you’re able to balance your work with your studies and other priorities, working can be a great experience as an undergraduate. I loved working at my campus library. I memorized shelfs and sections to better serve students looking for certain topics, like Shakespeare or molecular biology. In class, my professors stressed my resourcefulness to my peers — that I’d be at the circulation desk certain mornings to help navigate the library.

However, some of my other jobs weren’t as enjoyable and sometimes were unbearable. Altogether, my ambition to pay for college outweighed my studies. Schoolwork became a supplemental priority behind work. Thankfully, my grades didn’t drop, but they weren’t the best they could’ve been in hindsight. On many occasions, I even compromised my mental health. I’ve suffered from anxiety nearly my entire life, but it wasn’t until months after graduation where I sought bimonthly counseling.

Again, I was lucky enough to graduate. Others faced with similar situations are less likely to graduate. I also had the resources to apply to college. Many in financial need might not have even graduated from high school. According to NJ.com, my alma matter — Ocean City High School — has about a 97 percent graduation rate. Newark Vocational High School, which some of my classmates in the same state scholarship program attended, has a 64 percent graduation rate.

I concluded my last piece acknowledging that I wasn’t as different as I hoped to be, in terms of graduating college without debt. I’ll conclude this one by recognizing the differences that allowed me to go to college and work my way through.

Danielle Corcione is a freelance writer based in Omaha, Nebraska. Her work has recently appeared on Care2, Upworthy, and more. Follow her on Twitter via @decorcione.

My husband works part-time from home so he can stay home with our two-year-old son, and I teach full-time. We make about $48,000 a year combined.

We are buying our home, have no car payment, and my student loan balance is higher than what our house cost.

You’re in the process of buying a home?

We bought a foreclosure in 2012–30-year mortgage.

My husband had terrible credit, but it ended up that they wouldn’t put my name on the loan because of my student loan debt. I was shocked! I had spent a couple years cleaning up our credit reports, but he had an old credit card that had gone to collections. I was sure it would count heavily against him, and he was approved by himself for the loan!

I am also surprised that student debt would count against you like that. It’s supposed to be the good debt!

Right? I was so shocked!

So how heavy is your loan burden, and how much are you putting towards it every month?

I hate typing this number out! I try so hard to pretend it doesn’t exist. I owe about $82K, all federal loans. I’m on income-based repayment, so I pay a little less than $200 a month. I’m not making a dent.

I’m hanging my hat on the Public Service Loan Forgiveness Program. This is my third year teaching… seven more and supposedly the balance will be forgiven.

My education was not from fancy schools or anything. I took out more loans than I needed to because we were so bad at managing our money. I worked during school, but it didn’t really cover living expenses, so I used loans to fill in the gaps. I had no idea what I was getting myself into, and I’m embarrassed by that giant number, but my husband is cool with it and we have a plan (that depends on the government not overturning the Public Student Loan Forgiveness Act, unfortunately), so I try not to freak out and am working on forgiving myself for being so stupid with our money.

I’m not sure it’s about being stupid. The system is set up to encourage these kinds of situations. You were, in fact, doing exactly what people wanted you to do.

Well… we bought some non-necessities when those overage checks came. I could have been more frugal.

I grew up in a very low-income household, so it was hard to tell myself no when I was out on my own. I’m still a frugal person — no designer clothes or anything for me, but my husband and I love to dine out, for example, and it is hard to curb the habit of going out a couple times a week, even though cooking would be less expensive.

What’s the splurgiest thing you bought with those overage checks? I’m curious because I often feel guilty about my splurges too, even though they’re often necessities that feel like splurges, such as “a new pair of shoes to replace worn-out ones.”

I’m so embarrassed to say it! We bought a new TV once. The old one was technically still working, but it was one of those big old tube TVs, and I didn’t think we needed a new one. But my husband won the argument. This was in 2009–2010 so we spent about $600 on a flat-screen.

I am trying to find the balance between splurging and really needing to replace long-worn out items. Where is it? Clothes are something I struggle with. I had to buy a bunch of maternity clothes when I got pregnant, and they had to be things I could teach in. Then I had to buy non-maternity teaching clothes that I could easily pump in. I got down to pre-baby weight and then gained 10 lbs back, so I had to buy even MORE clothes.

But how many clothes do you need before you’re buying non-necessities?

I don’t actually think that’s a rhetorical question! I’d argue that you need enough clothes that you can go two full weeks without repeating an outfit (you can wear individual components like jeans more than once), and that none of your items, including underthings, can have worn-out spots or holes.

Obviously a lot of people get by on less clothing than that, and I’m not meaning to say that everyone should drop everything and buy stuff… but until you have that much clothing, all clothing you buy is necessary and not frivolous!

I like that answer.

Also, that television might have turned into a necessity at some point. Didn’t we all make the switch to digital around that time, making most old-school TVs obsolete?

Yes! That happened. I think we got one of those converter-boxes but could hardly get it to work.

So let’s switch up the conversation a bit. You’ve made what you call “financial mistakes” in the past (spending your money on outrageous items like clothing and a new television!), but what do you hope to change about your finances going forward?

Just to be clear, the new clothes during pregnancy, etc, were not bought with student loan money. Just the TV and copious amounts of fast food!

Oh, sorry. Got it. But do you have resolutions for the New Year? Thoughts about increasing earnings or decreasing expenses? Five-year plans?

Going forward, I would love to not carry credit card debt. We had a clean slate until this past summer when our air conditioner went out the same week as our 15-year-old car broke down. So we are slowly paying on a 15-month no-interest card. The AC and car repairs would have wiped out our savings, so we kept the cushion of cash and will pay the card off before the interest kicks in.

No-interest is good, though! Better than interest, LOL.

I know! I felt so proud that I found that deal!

I would love to cut our food expenses, but honestly in this season of our life, we just need someone else to cook sometimes. I work 10-hour days a lot, and it is hard to cook every night. My husband is tired when I get home, I’m tired, and we are not good at embracing the Crock-Pot meal! (I’m working on it, but he’s picky!)

I would love to get some sort of retirement plan set up for my husband. He works for a tiny family-owned business, so they don’t do a lot of benefits. They actually asked him last week if he “would be interested in a 401(k),” but who knows if that will ever happen.

I have a 403(b) through the school system, but haven’t thought about upping the contributions or anything.

Five-year plan? My kid will be in school by then, which will change our income, which will hopefully change our savings situation. I would love to pay more into our retirement and build up a bigger cushion in our regular savings account. I’m not worried about paying our house off early — we owe less than $60K on it. And I told you my plan for the student loans. I would love to, like, start a college fund for my kid or start investing, but those things just seem intimidating right now.

Really, it sounds like you’re doing everything right, from my perspective. I’m sure there are various ways to nitpick your situation, but you aren’t living ridiculously outside your means (even when you buy on credit you’re doing it because of a specific, necessary purchase), and you’re solving the otherwise expensive child care situation right now in a way that makes sense for both your income and your husband’s career options in the future.

I bet if I asked you how much you spent on eating out every month, I’d get a figure that was relatively small, and possibly equivalent to grocery costs. Less than $300, right? That’s my educated guess.

This month we have spent $662 on groceries, and $347 dining out. For two adults and a two-year-old.

Okay, so my estimate was $47 dollars short.

Haha. I would have thought it was more, actually. Last month it was about $650 though, which included a 6-day road trip and a separate week-long visit with out-of-town friends.

But still. You’re doing great with the resources you have and the financial environment we’re living in!

With that in mind: do you have any advice for Billfold readers?

I think my advice would be: if you’re feeling bad about your spending habits, talk to a financial expert like Nicole who can ease your fears!

]]>https://www.thebillfold.com/2015/12/how-a-teacher-in-tennessee-does-money/feed/0Here’s One Way to Pay Off Your Student Loans in a Yearhttps://www.thebillfold.com/2015/12/heres-one-way-to-pay-off-your-student-loans-in-a-year/
https://www.thebillfold.com/2015/12/heres-one-way-to-pay-off-your-student-loans-in-a-year/#respondWed, 09 Dec 2015 14:00:12 +0000https://www.thebillfold.com/?p=24818

There’s something metaphysical about driving alone through the night. As the world slips into darkness, you enter a free-form self that is post-sleep and incoherent. After a few hours, the parameters that separate you from the prism of night dissolve, and only an elongated tube of light sucks you along.

Why did Langellier take the job? “A spiritually paralyzing tower of student debt​ from four years of college.” He doesn’t say exactly how much debt he has, but he does say that it is in the “tens of thousands.” He begins working as a trucker in October 2014; by April 2015, the debt is paid off.

It’s worth noting that one of the big reasons Langellier was able to pay his debt off in one year was because — wait for it — he wasn’t paying rent. I’ll let you do your own math on how much debt you’d be able to pay off if you weren’t putting 20 to 50 percent of your income towards housing.

His story makes me wonder why more people aren’t signing up for jobs like these. Spend one year out of college getting your debt paid off, and then start a different career. Would employers look down on that kind of gap year, or would they see it as a smart move?

Of course, if you don’t want to be a long-haul trucker but still want to pay down your student loans as fast as possible, there are other options. Bloomberg Business reports that student debt repayment is “the hot, new company benefit” for businesses that hire a lot of recent graduates and want to incentivize young people to join their team:

So far, companies that hire swaths of college grads — a group that tends to have a lot of debt — are at the forefront of the trend. PwC, for example, plans to hire more than 11,000 through campus recruiting this year. Most employers tend to put from $100 to $250 a month toward an employees’s debts while capping the amount they’ll contribute, said Tim DeMello, founder and chief executive of Gradifi, a platform that helps employers such as PwC contribute to employee student loan payments.

Have you ever thought about signing up for a job like long-haul trucking, just to get a debt paid down? Are there any Billfolders who have actually done it? For the rest of us: do you consider an employer’s student loan benefits, whether it’s $250 a month towards debt repayment or the Public Service Loan Forgiveness Program, when you plan your ideal career?

At work, we have a lunch routine. It involves realizing that it’s long past noon, we’ve all forgotten to eat, and we may as well coordinate delivery. We exchange money or cover the next day’s meal. We work in the social sector, so we almost invariably look at our banking apps, and I give due thought to my spreadsheets. My life exists in them. It’s part of my job to make events on a budget, tracking how to grow financial and cultural capital in the non-profit sphere. This blends into my personal spending: spreadsheets for groceries, gas, car repairs, meals out, and semi-affordable martial arts classes. Spreadsheets for projected income and for potential times of unemployment. I imagine line items for indulgent expenses while I live with four roommates. This is all slightly complicated by the fact that in March, I withdrew from medical school.

This is not in and of itself a bad thing. (Per one Dean’s assessment, it was simply “a bad fit.”) But the simplest fact of the matter is that my gracious and generous parents paid for my education. I withdrew with no savings, but with no debt, either. Moreover, luck-by-birth came with luck-by-hobby: old writing jobs and arts pursuits made me a hireable non-graduate. I know what I like again, and I can do it for a living — which is less than common.

According to a 2014 study, only 47.7% of surveyed American workers were satisfied with their jobs. In this sense, doctors are about average. A 2012 study from Medscape found that half of physicians would pursue the same career again. It also found that 45 percent reported not feeling “rich,” due to debts and expenses. These pile on early. Last year, 49,480 people applied to American medical schools. Between the tests, transcripts, primary application, secondary applications, travel for interviews, and repeat tests and applications, the process alone can cost several thousand dollars. Upon enrollment, tuition can climb to over $58,000.1 Over 24 percent of applicants were trying for the second time or more, and overall, only 41 percent matriculated. According to the American Association of Medical Colleges, the behemoth middleman behind tests and applications, accepted students had an average science GPA of 3.63. Moreover, accepted students are often published researchers, and accomplished in some obscure hobby that makes them unique — despite their Sisyphean willpower to focus on studying.

The attrition rate is slim. Medical school typically lasts four years before additional, paid training begins. In 2007 the AAMC found that 94.2% of students finish within seven years. But, somewhat notoriously, perfectionism and anxiety keep students from telling each other when they struggle. (In my own experience, a few students confided in me after they knew that I had fallen behind.) I found it extremely uncomfortable to let on that I was unhappy. Other students continued to ace exams, party hard, and recover in time for band practice while I scoured YouTube for a study method that might stick. I had stress-induced anxiety, depression, and chest pain so severe that I couldn’t move. It was startlingly simple to withdraw via email, after all of the mayhem for admission.

There isn’t a formula for emotional debt, and I can’t bring myself to calculate what my parents spent on me over the years. There is no way to repay their generosity in full with an already winding career path. I simply owe nothing to the government or a bank, and apart from mild consumer debt, I started my current job with no money. I am slowly — very, very slowly — building up. This zeroing is my privilege. Moreover, it’s the zeroing that taught me something new. Since I dropped out, more medical students than I can count have expressed to me, in private, their wish to quit, and their disappointment in themselves for staying.

If I could recreate the resources I had and redirect them, I would. The money could go toward my friends’ scholarships, or offset costs for a kid who wasn’t born rich. The time could go to building a more egalitarian application process. I like to think that if I won the lottery, I would pay off my friends’ loans and therapy fees so that they could explore something else in life — something less binding, that requires fewer feats of payment and performance. Instead, the money is gone. It was absorbed into a medical school whose acceptance rate goes down every year.

I currently make $30,000, before taxes. (This is roughly 16% of the lowest-paying U.S. medical professions.) My paycheck is divided between my HMO, rent, debt, and the expenses of a social life that is often teetotaler and bookish. I save the small remainder. Three hundred dollars recently went toward new brakes — an amount that would barely cover one medical textbook, but made me consider giving up my car altogether. I regularly donate money to scholarship funds and clinics, but to what end?

Political rhetoric calls the student loan debt in this country “dire.” Medical school is dire on steroids. It can pay generously in the end. (Despite not feeling “rich,” six figures are six figures.) Getting there, though, requires inhuman gumption or a benefactor or both. It shouldn’t bar so many capable young people from considering one of our world’s irreplaceable professions. It should pay well, because it is often unspeakably difficult. But equal access should be the rule, not the exception. I didn’t earn my freedom from the barriers between intelligence and opportunity, and no one deserves the barriers in the first place. There are students — compassionate, hard-working, and much more capable than me — who simply cannot afford to apply to medical school. Or, if they make it there and find themselves miserable, there are those who cannot afford to quit without insurmountable debt.

Colleen McLellan works for a wonderful non-profit in New Orleans, Louisiana. She practices capoeira, hosts a radio show, and almost never misses medical school.

1 The average applicant applies to 15 schools. The standard application, called the AMCAS, is sent to the initial school for $160 and to any additional schools for $36 apiece — after which a secondary application, costing anywhere from $25 to $100, is often required. Each application requires every official transcript the student has, at $10-$20 apiece. This is all in addition to the Medical College Aptitude Test, or MCAT, which conveniently bundles the cost of testing and score distribution into $300. But the MCAT content changed last year, and a newly designed prep class will run you over $2,000. (Many people take the MCAT more than once.) There are fees for recommendations, travel expenses for interviews, and additional tests and fees for applying to Doctor of Osteopathy programs.

My student loans are now officially closer to $200K than $150K. If you convert the balance to Canadian dollars, the currency in which I conduct the rest of my life, they’ve already sailed well past that number. They’ve been steadily growing since I finished grad school in 2011, and the things I tell myself to cope with this have been evolving at a similar rate.

During most of the four years since I graduated, it has been financially impossible to make payments that would cover the interest and start to chip away at the principal on my loans. Fortunately, Obama introduced Income Based Repayment (IBR), which I like to think of as an education tithe. Since I couldn’t possibly make enough money to actually cover the cost of my education, the government would accept a symbolic percentage of my income every month for the better part of my adult life. I didn’t worry too much about the tax I’d have to pay on my forgiven loan after those 25 years were over, since I also firmly believed that the entire American economy would collapse before that time. I found it comforting, really. I’d be living here in Canada when the Tea Party or whoever finally threw America into such disarray that the ballooning balance on my loans would be forgotten. It might be tomorrow or it might be in 2030, but the full collapse of the American economy would be a much bigger issue than the $300K+ of student debt that I would inevitably end up asking the government to forgive.

I can’t imagine that my survivalist attitude is uncommon. I got into this situation the same way a lot of people get into this situation. When I was 21 and starting grad school, I just assumed that everybody took out loans to cover the cost of a professional degree, and then paid them off with the salaries from the professional jobs they were able to secure afterwards. It’s worth noting here that I started architecture school in June of 2008, just months before the crash. It quickly became clear that it was not a good time to be banking on a future in architecture.

If I’m feeling a little more forgiving of my 21-year-old self, I like to indulge the notion that this was actually the best possible outcome. When I was 18, my mom was diagnosed with squamous cell carcinoma and she spent the fall semester of my sophomore year getting chemo and radiation treatments. When I was 19, my dad was diagnosed with Alzheimer’s Disease, and all the reading I did during my junior year confirmed that there was no treatment for this at all. I probably drank way too much in college, and I spent the summer between my junior and senior year working two restaurant jobs without managing to save any money at all. So when I want to forgive my financially irresponsible 21-year-old self, I play out different scenarios where I moved back home after college. I probably went back to those restaurant jobs and began haunting the two suburban bars where young people hung out. I would have lost both of those jobs when the grief over my dad’s death consumed me. I would have driven drunk on suburban roads. I would have racked up credit card debt. As it is, I didn’t really snap out of it until 2013, so I have my 21-year-old self to thank for the fact that when I snapped out of it, at least I had an M. Arch to show for myself.

When you are consumed by grief (or youthful ignorance, you decide), it can be very difficult to navigate the bureaucratic barriers that are put up to prevent you from making meaningful payments on your loans. I have spent weeks, no hyperbole, trying to get approved for IBR and set up a banking situation that would allow me to automate my loan payments. For two years I had to call the loan office at the University of Michigan every month to make a credit card payment by phone, since this could not be done online.

My most recent IBR application was rejected three times in a row because it didn’t include a pay stub. Even though my employer did not provide pay stubs and I had submitted bank statements and tax forms that more than covered the information a pay stub might offer. This was ultimately settled when I told my loan handler that I would write a letter repeating everything in my application, then print it out on company letterhead and send it to them. That was what they needed. My bank statements and my legal tax forms were not as credible as a document that I created by myself in Microsoft Word.

The experience of opening a cross-border bank account and applying for automatic debit has been equally frustrating. All of them have required submitting forms, waiting an undetermined number of weeks for the forms to be delivered by mail, and then completing a follow-up action as quickly as possible. For three years I couldn’t maintain the focus to do this. Whenever I missed a follow-up deadline and had to start over, I comforted myself with the certain knowledge that the American economic system would collapse within my lifetime. Whenever I actually succeeded in navigating one of these eternal bureaucratic mazes, I revelled in my adherence to the American Dream where hard work and applying yourself are their own rewards.

But, I recently found another reward. Days after the first automated payment was debited from my U.S.-based bank account (and years after I finished graduate school), I was offered a job that felt tailored to all of my experiences so far. There was architecture, which I’d studied, and editing, which I’d been doing ever since. There was a six-month contract and forfeiting my benefits, and a slight wage cut, but I’d be moving my experience and credentials in the right direction. As I considered what life would be like as an independent contractor — invoicing, collecting sales tax, paying for my own dental visits — I realized that there was nothing stopping me from turning my existing job into a contract position as well. My boss had barely been in the office for months and our client load had dipped and this would be a great way to boost my income. During my first month as an independent contractor, I invoiced my old company for about 75% of my previous monthly income. I felt pretty clever. Why didn’t anybody tell me that working two full-time contract positions was the secret to making meaningful progress on my loans?

Now that I’ve moved up a tax bracket, I’m trying to plan for my financial future. I devoured Your Money or Your Life and read back through a bunch of Mr. Money Mustache. I tell myself that I’m living frugally so that I can retire early, while putting 18 percent of my income into a retirement account and converting about 60 percent into USD to pay down my student loan interest. I feel smug for opting out of consumer culture while investing my savings in an economic system I’ve decided to have faith in again. I expect that faith and that smugness to last about as long as my contracts do.

Brianne is the managing editor of an online architecture publication and a co-producer of the Stories We Don’t Tell podcast and events. You can keep up with her customer service complaints about banks on Twitter.

]]>https://www.thebillfold.com/2015/12/the-things-i-tell-myself-to-deal-with-my-200k-student-debt-burden/feed/0A Pre-Thanksgiving Student Loan Tweetstormhttps://www.thebillfold.com/2015/11/a-pre-thanksgiving-student-loan-tweetstorm/
https://www.thebillfold.com/2015/11/a-pre-thanksgiving-student-loan-tweetstorm/#respondWed, 25 Nov 2015 08:30:42 +0000https://www.thebillfold.com/?p=11780Logan messaged me to say that I should post about our pal Lauren Rodrigue’s recent tweetstorm about her student debt. Lauren’s Twitter account is set to private, but she graciously allowed us to collect the tweets here: